Reliance Retail - Quarterly Revenues ~ 36,000 crores. Number of stores 9907. Average Revenue per store = Rs 3.6 crore per quarter. Reliance Group Net Profit. Total EBITDA = Rs 22,000 crores. Total Debt = 320,000 crores. Total Debt/Yearly EBITDA = 320,000/80000 (extrapolated from one quarter) = 4.
DMart - Quarterly Revenues ~ 5,450 crores. Number of stores 164. Average Revenue per store = Rs 33.2 crore per quarter. Total EBITDA ~ Rs 470 crores. Total Debt ~ 500crores. Total Debt/Yearly EBITDA = 500/1900 (extrapolated from one quarter) = 0.26.
From the number we see that financially DMart is performing much better than the retail arm of Reliance. Reliance has a much greater leverage in terms of scale. Its total EBITDA is about 40 times that of DMart and will remain thus for some time. Its debt is also 500+ times more but they are quite capable of servicing it.
I do not know if Reliance Retail gives a break-up of the store types. From lat years annual report I could see that there are about 523 Reliance Fresh stores which may have gone up to 700 now. Then there is something called Reliance Smart whose numbers I do not know. Their last years annual report says Reliance Digital has 7000 stores. I think this includes both the electronics store and the Jio stores.
Reliance is the largest retailer and DMart is the most successful in India. If we look globally the DMart model has come up more successful but it does not guarantee anything in India. I think there is going to be two way customer poaching. For Reliance the 164 locations of DMart are good poaching grounds for customers. Similarly the 1000 Reliance Fresh and Smart stores are good poaching grounds for DMart. My observation is that wherever DMart goes, smaller(or other) retailers like More, BigBazaar, etc close shop. I have not yet seen the reverse happening. Now this is purely anecdotal and there is no empirical data to support this.
The strength of Reliance Retail are the following -
The parent company throws out 80,000 crores of EBIT every year. Hence Reliance is much more aggressive in opening new stores in newer locations.
As the scale of operations increase their leverage with suppliers increase. Probably lower cost and longer supplier payment cycle.
Reliance Jio gives them an advantage in terms of technology. Probably tech savvy customers will move to the more advanced Jio platform for their shopping. But from experience I have observed that PoS is much more easy at DMart. Even with their primitive PoS systems I never experienced a single mistake in their check out process. Reliance with all technology is way behind.
Ego of promoters. To become number 1 Reliance can throw cash at the problem at a scale DMart wll not even be able to dream of. Reliance can throw profitability to the winds and the shareholders will not bat an eyelid.
The weaknesses of Reliance of which some are strengths of DMart.
- Per store revenue is much less compared to DMart.
- Many stores are smaller and hence does not cater to the monthly grocery needs of many families. I faced this issue and stopped going there since the new store at Kharghar is too limited for my monthly grocery shopping. Other locations may be better.
- Fruits and vegetables - I may be wrong here but the amount of wastage could impact profitability in a business where the net margins are 5-8%.
- They open in newer locations which opens up the market. DMart can later come and set up a store and poach their customers. This happened for More and Biz Bazaar in Kharghar. Reliance can also do the same but then the poaching ground is smaller.
- Reliance Retail is into many luxury brands. Most of the luxury brands will not perform so well in India for some time into the future. Even Hamleys are deserted these days.
I do not know who will survive to write the story of Indian retail. Kishore Biyani wrote his story a little too prematurely. Let us watch Dmart and Reliance closely.
I feel if done well a diverse nation like India will have space for more than a few retail giants.